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TechnoratiBehind Skyrocketing Oil Prices
Yesterday comes the news that the Commodity Futures Trading Commission (CFTC) is investigating potential manipulation of the oil trading market.
That's a good thing, though the CFTC is not exactly the most aggressive regulator around. (Says Judy Dugan of Consumer Watchdog: "On its face, the investigation smacks of the fox investigating a hen shortage in the chicken coop.")
Market manipulation may be contributing to the recent oil price spike -- though even in the worst case, it is only part of the story. The most important factor is supply and demand: supply is having trouble keeping up with unabated demand growth.
Are Wall Street firms and hedge funds in fact manipulating the oil market? Perhaps. There are certainly enough conflicts of interest, and unregulation, to make such activity plausible. These aren't exactly guys with an honorable track record.
Whether speculation is driving price up is a separate issue from manipulation. Investment dollars are pouring into oil futures, pretty clearly driving up price. This reflects supply and demand for oil futures as an investment tool, more than available supply and demand for actual crude oil. Some nontrivial portion of the recent run-up in price is almost certainly due to this speculative activity, which is fueled by leveraged buying (use of borrowed money).
At the end of 2007, with oil prices around $100 a barrel (a shocking height, just half a year ago), Jennifer Wedekind, my colleague at Multinational Monitor, interviewed roughly a dozen oil analysts about the price of oil. They were divided on the reasons for high oil prices of $100, with some agreeing that speculation -- but not manipulation -- played a role and others fiercely denying it.
Among those attributing some role to speculation was Linda Rafield, a senior oil analyst, with Platts: "We have seen money market funds and asset managers and portfolio managers definitely putting money to work in the commodities sector, and that certainly has bolstered prices, since most of those people notoriously will trade from the long side." Against speculation as a factor was Jeff Rubin, chief economist and chief strategist, CIBC World Markets. Asked what factors were driving the price spike, he said, "Certainly not Middle Eastern instability or speculation or so-called geopolitical factors."
Six months later, it seems like speculation has become increasingly important. It's just very hard to identify what has happened in the last half year to jump prices by a third.
A second key factor in rising prices is the decline in the value of the dollar. A barrel of oil today is worth a barrel of oil tomorrow. If the dollar is worth less tomorrow than today, then the dollar value of a barrel of oil will be higher tomorrow. Against a basket of currencies, the dollar has fallen by 25 percent since 2003, and considerably more since its peak in 2001.
But, whatever the allocation of blame for today's price, the most important factor in the big picture is supply and demand.
Global demand is growing at a steady clip, thanks to very rapidly rising oil use in China, India and the Middle East.
Global supply is stretched thin. Some argue this is because the world is at or near "peak oil production," a tipping point when half the world's oil has been extracted, and yields begin to decline, with very major price effects.
A different view is uncomfortable with the apocalyptic element of peak oil theory. From this vantage point, more oil -- or close substitutes, like tar sands or shale -- is available, but it is harder and more expensive to get. This is the preferred view of the oil industry analysts (many of whom note that much oil that is easily attained from a technological standpoint -- for example, in Iraq -- is hard to reach for political reasons).
Either way, the supply challenges combined with rapidly growing demand means the world is going to see steadily higher prices. Additionally, very tight supplies will inevitably lead to price spikes that appear irrational from a close-up view.
Says Charles Maxwell, senior energy analyst at Weeden & Co: "So long as capacity utilization in the world crude oil producing system is running at 98 percent, which it is today, and so long as perhaps one-and-a-half, 2 percent, that's excess, is in the form of Saudi heavy, sour crudes, which the typical American refinery can't use any more of -- they use some, but they can't use any more of because it has very serious effects in pitting the insides of these pipes and then requiring the refinery to shut down for a long time and the redoing of all the pipes -- we're going to have these periodic price rises of this sort."
Explains Maxwell: "Any system needs to have a little cushion between adversity that strikes -- weather factors or cut-offs for political purposes or political struggles from civil wars. We don't have in this system enough of a cushion. Normally, capacity utilization is considered ideal around 94 to 95 percent. So our 98 percent capacity utilization is well above that and we can't get it down, because it takes 5 to 7 years to create it and we aren't spending the money today that would create it 5 to 7 years out."
So, by all means, forward with a robust investigation of market manipulation, and yes to re-regulating oil markets that are now too financialized and removed from the buying and selling of real oil.
But the supply-demand challenges facing the world are much more serious than the speculative and other factors contributing to the present run-up in price.
It's hard to imagine why the United States -- or the world -- would need more incentive than responding to climate change to invest in renewables, mandate much tougher efficiency standards for cars and a switch away from the internal combustion engine, and massively scale up public transportation. But climate change doomsday scenarios have, so far, not proven enough. Perhaps the prospect of $200/barrel oil will.
Robert Weissman is co-director of Essential Action, a corporate accountability group based in Washington, D.C. that focuses especially on international issues and has been very involved in the access to medicines campaign. He is also editor of Multinational Monitor magazine. With Russell Mokhiber, he is editor of a weekly column, Focus on the Corporation, archived at http://lists.essential.org/pipermail/corp-focus.
74 Comments so far
Show AllJake, if you listened to the news friday, they are saying that the biggest single day spike in oil prices ever was due to comments by officials in Israel saying that an attack on Iran appears to be unavoidable. I would say that was pretty solid evidence that the threat of war with Iran MOVES THE MARKET! Nuf said!
"And then here is the Enron style unregulated trading and the manipulation of supplies:"
You can't reliably manipulate supply when your competitor reacts against you by doing the opposite.
"Soros: Syrocketing Oil A Bubbble
"
So does he think the bubble will pop short term? Oil prices have taken a big hit in the last couple days. I know that doesn't mean anything in so short a time frame but still. The financial media blames unexpected surpluses in inventory and recent decrease in consumption.
And then here is the Enron style unregulated trading and the manipulation of supplies:
http://www.nakedcapitalism.com/2008/05/soros-skyrocketing-oil-prices-bubble.html
Soros: Syrocketing Oil A Bubbble
Veteran investor George Soros, in an interview with the Telegraph, describes speculation as a significant factor in the recent spike in oil prices.
Speculators are largely responsible for driving crude prices to their peaks in recent weeks and the record oil price now looks like a bubble, George Soros has warned....
"Speculation...is increasingly affecting the price," he said. "The price has this parabolic shape which is characteristic of bubbles," he said.
"Until recently, US energy futures were traded exclusively on regulated exchanges within the United States, like the NYMEX, which are subject to extensive oversight by the CFTC, including ongoing monitoring to detect and prevent price manipulation or fraud. In recent years, however, there has been a tremendous growth in the trading of contracts that look and are structured just like futures contracts, but which are traded on unregulated OTC electronic markets. Because of their similarity to futures contracts they are often called "futures look-alikes."
And:
"Finally, some suppliers may simply be choosing not to pump."
"It is being left in the ground."
How strange. U.S. oil consumption is down yet prices continue to increase at the pump ?
From: EIA Energy Information Administration
May 6, 2008
http://www.eia.doe.gov/steo
" Consumption: Total petroleum consumption of liquid fuels and other petroleum products averaged 20.7 million bbl/d in 2007, essentially unchanged from 2006 (U.S. Petroleum Products Consumption Growth). Based on projections of weak economic growth and record high crude oil and product prices, consumption is projected to decline by 190,000 bbl/d in 2008, a sharper drop than the 90,000 bbl/d decline projected in the previous Outlook."
note: One of most widely read columnists on earth is claiming that American consumption is growing. Friedman says, "Prices are what they are as a result of rising global demand from India, China, and a rapidly growing Middle East on top of our own increasing consumption." But of course the New York Times also promoted the WMD lies.
And like Friedman, Weissman wants to blame high prices on the Chinese and India who consume a fraction of what the United States consumes. This is spin city !
Give this blog a bit of thought.
http://economiclogic.blogspot.com/2008/05/oil-price-problem-is-dollar-problem.html
" We can see clearly that gas prices have increased much less in Germany in euro terms than anywhere in dollar terms. Two thirds of the US increase can be attributed to the weak dollar."
" That more than half of the increase in the dollar denominated price of crude oil is due to the weakness of the dollar, and less than half to the actual increase of oil prices. So much for blaming China and India, the real culprit is the US dollar. "
And prior to the invasion if Iraq the Euro and the dollar were nearly equal for purchasing oil. Not so today as presently one Euro will purchase $1.56 dollars.
My opinions and information do not offer a "koolaid" solution for the complex realities of long term global energy requirements and supplies. We have to make changes as I would guess that if all of the various carbon fossil fuels in the earth were extracted and burned, the atmosphere would be more or less destroyed.
The main point related to this "skyrocketing oil prices" article that I am stressing is that the current and rapid increases in the cost of energy for Americans is not due to a dramatic shortage in the global supply of crude oil.
My primary reason for bringing these ideas forward is to point out the insanity in both human and financial terms of using military force in violation of international law to secure oil reserves for the benefit of American oil corporations in addition to the profiteering of the MIC.
Example: We could be well on our way to a solar infrastructure to energize zero emission electric cars with the $5 Trillion wasted in Iraq.
Anyone writing about energy inflation in the good old U.S.A. who does not take into account the devaluation of the dollar or the invasion and occupation of Iraq is either incompetent or has a hidden agenda.
How to fix our oil mess
@francis.coles June 2nd, 2008 12:11 pm
"surely the amount of speculation in the price is equal to the following:
- cost of extraction of most expensive barrel needed to satisfy demand at the current price; PLUS
- an appropriate profit margin, without which the extractor would not extract the oil.
All the rest is - unless I'm missing something - "speculation"."
You are asking the right question. Your question gets right to the heart of the matter.
No, it doesnt work that way. It cant work that way without rationing. There is no "appropriate" profit margin. Without rationing, the oil that is available gets sold to the highest bidders, regardless of whether the profit margin is high or low. What determines the price of oil is what people are willing to pay for it. You, the consumer shops for the lowest price (if you can be bothered). Those selling crude will sell it to whoever is willing to pay the most.
Now the production of the sort of oil that we are well equipped to refine (light sweet crude) appears to have peaked. The supply cannot easily be increased, so there isnt enough to go around at a lower price. If the price was lower, then more people want stuff than can be given. The demand cant be satisfied at a lower price. If you sell it all to Jack, at a lower price, then Jill says, "Hey, Im willing to pay more". So you sell it to Jill, and of course then Jack has to pay more. While people are short and willing to pay still more, the price goes up. As the price rises reaches the point where people prefer to do without rather than pay, then demand reduces. The price has to go up until it reaches the price where demand equals supply. That is the market price. Basically, we all have to pay the market price. The futures market may complicate this, but it cannot change the big picture.
I sent this message yesterday, but for some reason it didn't register. This has been a fascinating and enlightening discussion, especially when people remember to stay civil with each other. I believe one of the reasons for the skyrocketing increase in the cost of oil is because of speculation on the commodities market, plus the fact that it's like an unregulated wild, wild west. The same thing happened with the subprime mortgage market. And does anyone remember the savings & loan debacle of the 1980's? The FTC or whoever is in charge of the market, should demand that speculators pony up at least half of the cost of these investments, and no longer be permitted to buy on margin. What are the chances of that actually happening? Also, it's amusing (not) how supporters of capitalism always claim the market is self-regulating and that when a small business goes under, it's the market weeding out the weak and inefficient businesses/industries. That is, of course, unless you happen to be Chrysler, or Bear Stearns, or the s&l industry, in which case the government (read: taxpayers--you and I)is supposed to bail you out to keep the economy from becoming worse than it already is.
Fortunately, some governments are responding appropriately to Peak Oil, and refraining from the koolaid jconrad and jakenewton are offering; their suppositions are refuted by much evidence at the first of the links I posted above.
As reported in the ASPO June Newsletter[PDF]:
"The following article describes the new position of the Scottish Parliament, referring to Grangemouth, as they understandably press for more devolution to better manage their local affairs.
The Scottish Parliament today passed a landmark motion on food security which includes for the first time a call to take account of peak oil when planning our future food economy. (1) North Sea oil output peaked at 2.8m barrels a day in 1999, and last year this output was down by almost 60% on that peak. (2) Estimates vary as to when global oil production will peak, with the French Government taking a conservative view that the decline will begin in 2013. (3)
What is not in doubt is that demand for oil continues to outstrip global supply, meaning that local disputes like that at Grangemouth have a disproportionate effect on international oil prices, whilst pressure for biofuels is undermining efforts to tackle climate change. (4) As oil supplies dwindle globally, food supplies in Scotland and around the world are likely to be seriously affected, given the extent to which modern agriculture is dependent on oil.
Patrick Harvie MSP said: "This vote represents another landmark for the Scottish Parliament, the first time that any UK Parliament has accepted the urgency of the peak oil issue. Modern industrial agriculture has been
described as a system that uses land to convert oil into food, whether as fertiliser, fuel for transport, or energy for refrigeration, and Scotland is no exception.
"The recent events in Grangemouth had effects far beyond our shores, pushing global oil prices towards an all-time high of $120 a barrel. There could be no clearer illustration of the vulnerability of our economy to even relatively limited disruptions to oil supply. This dependence is unsustainable in the longer term, and Scottish Ministers need to start turning around the supertanker right now.
"The SNP Government has opened up a discussion about the future of food, which is welcome. There are many smaller measures that they support that we endorse, like farmers' markets and support for local food procurement. However, we have still yet to see any indication that they understand the radical economic and agricultural transformation that will be needed in order to ensure our future food security. We need to see major shifts to support sustainably grown, low-input, healthy and high quality local produce. The alternatives can hardly be contemplated." [Notes and other comment on this are at original link.]
The next item in the Newsletter is more to jakenewton and jconrad's liking. But as Colin Campbell notes, "experience suggests that securing foreign oil supply bymilitary means is not practicable, as it is difficult to produce oil in a battlefield," which is exactly what we see in Iraq, although the Shiite interest in Southern Iraq appreciates it's in its interest to maintain and increase flow rates.
For some reason, the resources available at ASPO, ASPO-USA, theoildrum.com, and energybulletin.net, amongst others are shunned, which is quite odd as these sites all accept the reality of Climate Change, opposed the Iraq War and are very Progressive in their basic political views.
"Grateful for any guidance on the above logic"
I think you are close.
"All sorts of media pundits are repeating the spin about supply and demand being the primary cause of very high crude oil prices, that is, if you are purchasing the oil with dollars. They never mention Iraq."
I hear them mention Iraq quite a bit, which is really just a factor affecting supply anyway. It was mentioned in the above article:
"A different view is uncomfortable with the apocalyptic element of peak oil theory. From this vantage point, more oil — or close substitutes, like tar sands or shale — is available, but it is harder and more expensive to get. This is the preferred view of the oil industry analysts (many of whom note that much oil that is easily attained from a technological standpoint — for example, in Iraq — is hard to reach for political reasons)."
http://business.timesonline.co.uk/tol/business/columnists/article3055813.ece
" Production in many oil-producing countries is constrained, not by geology but by politics. Iraq is producing only two-thirds what it did on the eve of the first Gulf war in 1990. That was no golden age, production running below potential because of weak investment during the Saddam era. Iran is producing well below potential."
tech2 June 1st, 2008 5:59 am
" there is something strange going on."
The nicest thing we can say about Weissman is that the lemmings often go over the cliff together. On the other hand he may be deliberately presenting conservative ideas within a pseudo-progressive format. It is hard to believe that he is just plain stupid.
All sorts of media pundits are repeating the spin about supply and demand being the primary cause of very high crude oil prices, that is, if you are purchasing the oil with dollars. They never mention Iraq.
One of the original Iraq invasion warmongers was Thomas Friedman, an apologist and propaganda minister (note his Nazi mustache) for Middle East Big Oil foreign policy and endless 'globalization" schemes.
His war cry was democracy and "modernity" for the Arab world, not unlike "manifest destiny" as the rationalization for killing Native American "savages". We have to kill them for their own good.
Part two of the plan was to steal Iraq's resources and create cheap oil while engaging in international war crimes.
He was also foaming at the mouth with the idea of undermining the economies of the evil oil rich Muslim nations by lowering the price of oil. The spin and delusions went on and on and bear a close connection to Israeli Likud policies.
But if you had played a key role in initiating war crimes, would you want to take credit for the results ?
Now Friedman is presenting the supply demand theory as an explanation for war-related energy prices. He stated in a recent editorial, "Truthful Energy Policy", stating, "Prices are what they are as a result of rising global demand from India, China, and a rapidly growing Middle East on top of our own increasing consumption."
And for whatever reason, Weissman is taking the Friedman position.
Neither Friedman or Weissman mention that Iraq's production is down, that sanctions on Iran has limited their production, that the Saudis are not increasing their exploration (some say due to the weak dollar) and that the dollar is in very serious trouble on international currency markets.
It now takes more dollars to purchase the same barrel of oil, and if there is a production crunch at the moment, the devaluation of the dollar multiplies the effects.
Prices are up somewhat and are also complicated by speculation, but the situation is much worse of you are talking about dollars for oil.
http://www.dailykos.com/story/2008/3/15/10846/0435/791/477201
" crude oil prices are moving up and it doesn't really matter what currency the price is in. However, that one day, February 27th, the change in the exchange rates has caused the price of crude oil in Dollars to go up by about twice the amount in Euros."
An interesting read:
http://echochambers.wordpress.com/2008/05/21/petrodollar-inflation-oil-prices-rise-when-the-dollar-fal...
" There is a direct relationship between Dollar value and oil prices. All crude oil purchases worldwide have been conducted exclusively in U.S. Dollars for over thirty-five years. [1] When Dollar value falls via inflation, oil prices rise. [2] [3] [4] This phenomenon could be called Petrodollar Inflation; it occurred during the 1970's oil 'price shock', and it is occurring right now."
And then there is always Gregg Palast who makes a reasonable argument that the purpose of the Iraq occupation is to limit production and drive prices up. If that was not the plan, it has been the result.
It looks like Weissman actually looked at Why Oil Costs Over $120 a Barrel or something similar as part of his research for this piece. If only the majority of those posting would too. It would also be wise of readers to explore the important concept of net exports and how declining amounts from Mexico and Venezuela affect the overall situation. It's remarkable to see folks who are very concerned about Climate Change being skeptics when it comes to Peak Oil. Both are connected, and addressing the latter helps to mitigate the former.
surely the amount of speculation in the price is equal to the following:
- cost of extraction of most expensive barrel needed to satisfy demand at the current price; PLUS
- an appropriate profit margin, without which the extractor would not extract the oil.
All the rest is - unless I'm missing something - "speculation". However, such speculation is required to keep the price at a level where demand is no greater than it currently is.
Grateful for any guidance on the above logic
It would be nice to think that, upon feeling the consequences of military spending, the USA would not immediately make more war. Unfortunately, when people are feeling the pinch domestically, that is the perfect time to make war internationally, and get people to support the war in order to support our troops. People will rally in support. Especially if there is no real danger of the victim country being able to strike back in the same way. War has always made the president's approval rating soar, and the republicans need that right now as we approach an election.
This makes the war with Iran more likely.
It is not really
The party is over.
The production of oil has leveled off - even decreased. There is plenty of heavy/sour crude, but we dont yet have the refining capacity for that. Too much of our refining capacity is for light sweet oil.
Imagine for a moment, what would happen if the price does not rise. Then people will continue to consume petrol at the current exponentially increasing rate. The reserves would soon be consumed, and then there would be rationing. How do we as a society distribute insufficient fuel. Our method is to sell to the highest bidder. Petrol retailers have to bid more, and if they are not willing to bid more, then they wont have petrol to sell. Those who choose not to sacrifice their way of life must then be prepared to pay more for it.
The oil price bubble may well burst, in the short term - if demand lessens. Because production will not be able to increase in the short term. It may take years until new heavy or sour refining capacity is created. In the mean time the price will go up, unless or until people change their consumption.
And then, in ten years time, heavy and sour will peak also. And people will blame the price rises on speculation, the Saudis, whatever...
@SallyUUKent June 1st, 2008 4:24 pm
Going by your post, you have nearly reached crisis point. You would be better off to make drastic changes sooner rather than later. Foreign debt and war spending will make things get worse yet. The party is over, and you WILL have to sacrifice your way of life, unless the USA itself does something drastic, e.g. reduce its military spending until it is comparable to the military spending of other countries. Otherwise, the price of food, heating and petrol will continue to rise, and your wages may well rise, but they will not rise fast enough to keep pace.
You may have to move into a smaller, easier to heat house or unit. You may have to get rid of your car and use public transport. You may have to move so that you can walk or cycle to work or have move to where you have convenient access to affordable public transport. But if you dont change willingly, then change will eventually be forced upon you, and that would be nasty. It is better to change willingly, while you are in charge.
It has been fascinating and informative to read the comments above. Thanks to all. Re: the mortgage meltdown. As far as I can tell this problem is very like the savings & loan debacle of the '80's--unregulated dipping into the "cookie jar" to purchase junk bonds or other questionable investments. Mortgage holders or their agents invested in the selling and reselling of these instruments. The common thread between oil and mortgage crises (as happened with the s&l's) is investing in these things on speculation. This was mentioned early on in this discussion. A friend of mine (who is a day trader) suggested that commodities should be paid for by at least half when being purchased, instead of on margin. I don't know all that much about the commodities market, but I do know a thing or two about a balancing and maintaining a budget. Make investors pay for their purchases, just like you and I have to.
I sat down recently and worked out my budget to find out why I seem to be almost perpetually broke these days despite cutting back on almost everything. Well, it turns out that my fuel costs have quadrupled, my heat bill has quadrupled, my food costs have doubled and in some cases, tripled, my health care costs are through the roof and after everything gets paid off, I have nothing much left to live on. And I make $25,000 a year! Not exactly a minimum wage earner, but this economy has reduced me to living paycheck to paycheck when before, I always had plenty of money leftover each month as a "cushion" against unforeseen emergencies.
I had thought about getting a second job just to make ends meet, but recent hand surgery and the fact that my right leg will be in a cast for several months pretty much prevents that from being able to happen, so I am stuck living on one full time income that no longer meets my needs. I've cut out meals, medication and other stuff just to survive month to month, but that's still not enough. I don't know where else to cut anymore without putting myself in the poor house. If gas gets any more expensive, I will be forced to quit my job because I won't be able to afford to drive to it anymore and there isn't adequate mass transit where I live.
I feel like I am being squeezed to death and I can't do a thing about it. In the meantime, wildcatters and speculators on Wall Street are running up oil futures prices and making huge fortunes, and the Iraq War is consuming so much oil and money anymore that it's bankrupting the US. With the Iraq War, the US has a tiger by its tail - we can't let go and we can't hold on, either. So what is going to happen? Are we going to be paying $6 - $8 a gallon for gas by year's end and forcing people like me to quit long time careers because we can no longer afford to get to our jobs?
Where is the outrage? Where is the calling for heads to roll? Or don't people care, as long as they have their 200 channel satellite TV's and surround sound home theatre systems that eat a ton of electricity each minute? The middle class is a thing of the past and unless we want a two class society of haves and have-nots, then we'd better wake up and do something before it's too late!
"because I believe (with evidence to support that belief) that the illegal invasion of Iraq was all about control of the black gold…"
It would have been easier to just buy it.
"Whether we did it to decrease production and raise the price, which benefits those who rule, or increase production to screw with OPEC or just to keep the Russians and Chinese from controlling it. "
You should really pick one or the other I think.
"We have several attack boats and aircraft carriers operating just outside Iran's territorial waters, some think with the intent of provoking a fight. "
I understand we've been doing this for a while.
"Well, it's been fun."
Back at ya.
I have to address one more issue before I go, and it is a key one, because I believe (with evidence to support that belief) that the illegal invasion of Iraq was all about control of the black gold...Whether we did it to decrease production and raise the price, which benefits those who rule, or increase production to screw with OPEC or just to keep the Russians and Chinese from controlling it. Oil is why we are there.
When you say you haven't looked at the output figures on Iraq's oil in a while, you mean ever. The reason is it is anybody's gues is that Iraq, alone among oil exporters, has no meters on their wells. As I have pointed out in a related post on Commondreams, there is evidence of pipelines being built which go directly to Kuwait and/or Turkey. Who owns this oil? Who decides how much to pump, where to send it, how it is refined, and where is all of that money going? Until we know the answers to those questions, it is impossible to know the extent to which oil is being diverted out of Iraq.
As to your dismissive tone towards the Iran saber rattling...We have several attack boats and aircraft carriers operating just outside Iran's territorial waters, some think with the intent of provoking a fight. Prominent politicians have been publicly speaking out in favor of bombing Iran...most famously John McCain. This is a lot more than just 'business as usual' and has a huge effect on oil prices. This is yet another example of a Presidents ability to impact the economy, your cited article notwithstanding.
Well, it's been fun.
"Your first mention of GDP"
Percentage of GDP is a common way to add context to a number that otherwise sits by itself.
"is the war behind skyrocketing oil prices."
Yes but not solely.
"I cite the manipulation of Iraq's oil "
I haven't looked at their output figures in a while, perhaps we should look.
"Iran being threatened militarily"
I just don't think recent rhetoric on this in any different than a few years back or if the pit traders put any stock into it. If it becomes inevitable that Iran will be attacked we will certainly see a spike.
"I'm not sure what your point about the GDP does to address the issue of high oil prices,"
It doesn't, it was to address a point that was made and often made about a record debt in dollar terms only. That figure alone lacks context.
but if you are saying high oil prices are irrelevant because the GDP is at an all time high, that does not address the issue.
"but if you are saying high oil prices are irrelevant because the GDP is at an all time high,"
The oil prices as it relates to the economy have a great effect I am sure. It is like dragging and anchor behind a ship, and the higher prices being like an ever increasing weight of the anchor. Since energy use can often be used as a proxy for GDP, at least in the short term, then higher prices will certainly effect GDP output if it means decreased energy use, in the absence of any increased efficiency.
And I'm sorry if "going apeshit" offended you. As for looting the treasury, just exactly how stupid can you get with the national debt now larger than the entire aggregate of all previous national debts combined."
Not as a percentage of GDP. That was back in the mid forties.
Your first mention of GDP, so technically not a statistic if s semantic victory means something to you.
And you are correct I (and you) have gone off topic. The topic is: is the war behind skyrocketing oil prices. I say it is, and I cite the manipulation of Iraq's oil and Iran being threatened militarily as powerful contributors to the current crisis...the diversion into sub-prime mortgages was to show the spiral induced by the combination of our military policy leading to market uncertainty and fear and the devaluing of the dollar was accelerated by the sub-prime crisis. These are related in terms of increased debt and the overall economic effect. I'm not sure what your point about the GDP does to address the issue of high oil prices, but if you are saying high oil prices are irrelevant because the GDP is at an all time high, that does not address the issue. That just spits out a dubious 'fact' that you are unable to make relevant to the discussion at hand.
BTW I do thank you for your civil manner.
"I'll start with the last first. Are you suggesting that the White House has no influence with regards to the types of spending bills brought before Congress, and how vigorously these bills are fought over."
No. It's called the "Bully Pulpit".
"the abject failure of this administration in safeguarding the public monies."
That is not in the job description of President.
"No doubt you would prefer the current situation over the balanced budget and economic prosperity we had under Clinton."
I believe the influence of the President over the economy is quite limited, good or bad. They always take credit when good, and blame previous or an opposing congress when bad. Here isn an article that supports my belief:
http://seattletimes.nwsource.com/html/opinion/2004333380_alexalben08.html
"You can quote all the GDP statistics you like"
Haven't quoted one yet.
"If the economy is so great, why is the income gap increasing at such an alarming rate?"
One has nothing to do with the other. I think most of the discussion about the so called income gap is partisan bluster. But you are changing the subject, I never said anything about the economy being great.
"the answer you run from is that the economy as a whole benefits the rich at the expense of everyone else. "
We weren't discussing that until you just now changed the subject, again, so you are wrong that I have run from anything. You need to stay focused on the discussion.
"If you cannot understand that, that you are part of the 1% who are economically benefiting, "
I'm actually unemployed now. You still haven't addressed debt as a pecentage of GDP, and a few other points.
I'm not an economist (which should be abundantly clear by now) so I can only try to learn from those who know more than I do. If you can teach me something new, cool. But, as your economic expertise is also questionable, I must rely on others who understand the big picture better than I do. After all, I have an I.Q barely above dog level, but my instincts are pretty good :>)
"And, the bank can, if it wishes, ask you to pay off the balance of your loan or risk foreclosure. "
That was true in the depression era but not now.
"Why do you favor economic policies that put us at a severe economic disadvantage to our 'enemies'?"
What economic policy have I stated that I "favor"?
Okay, if that is not happening now, why all the foreclosures?
Oh, they're foreclosing because people defaulted on their debt by not making payments. Could that happen to our government? I mean, is it possible we could be unable to make our payments on time? Again, I am not an economist so; who do we owe the money to, and how is the debt paid? What can they do if we don't pay. Well, in the case of the Arabs, they buy up America for pennies on the dollar. Like when a big investment bank starts to go belly up and a Saudi Prince buys out a controlling portion of the company's stock. Is this the kind of economy we can thrive on.
And the economic policy you SEEM to favor, based on your comments, is trickle down deficit spending economy.
If not, please state the economic policy we are or should be pursuing that will lead us to that promised land. My contention is that deficit spending and crippling debt is not the way to go, so enlighten me there, please.
With todays mortgage "crisis", there is only a very small percentage of families who are in arrears.
That small percentage was enough to cause the collapse of an investment bank and led to a huge government-backed buyout because it threatened to collapse our entire economy. Do you refer to that small percentage?
"And here is the difference. I have a mortgage, but I also have a job and can keep generating the income to keep paying down the mortgage. "
And following the analogy, the equivalent to your job is the GDP of the nation, which of course is at a record high.
"In our economy, our solution is to have more money printed up, "
This is true of *all nations*. There is no gold standard or similar anywhere in the world
You keep quoting the GDP as if it were an unassailable number and irrefutably the determining factor in the health of our economy.
Again, not being an economist, I cannot accurately explain why the GDP is irrelevant but perhaps you can shed some light here. Why does the crippling debt we have incurred not matter. I remember Cheney famously said such nonsense as 'deficits don't matter'. Yeah, not to him, he's profiting from the war and the economic policies in place. Is that your situation too, Jake? Are you benefiting from the misery of the masses ala Cheney, because otherwise I find it incomprehensible that you champion the current state of economic chaos, simply because some account's trick has a nice GDP number.
Instead of questioning my points, perhaps you could provide some factual information or economic experts you could link to who can explain why crippling debt is better than prosperity and a balanced budget, all because the GDP is a certain number. I am here to learn.
As to the printing of money...ours has been the international standard of trade; when we devalue our money, the other currencies gain vs. the dollar. International markets can collapse if the dollar fails. What we have done with our monetary policy threatens the economy of the whole world...so I think it is important that we have sound policies in place. Right now, we seem too not have them. If the Dominican Republic prints up too much money, the world is not threatened with economic collapse.
I'll start with the last first. Are you suggesting that the White House has no influence with regards to the types of spending bills brought before Congress, and how vigorously these bills are fought over. Do the leaders of the Senate and House on the Republican side meet with Bush and other Cabinet and administration officials? Of course they do, especially in this administration which has politicized every aspect of government. So, yes, the Bush administration has powerful influence over the kinds of bills submitted by the Republican party. On the rare occasions where congress and especially the Democrats have not bowed to republican pressures Bush can use the veto. Like when they attach ending the war amendments to Defense authorization bills. But, to admit to this, you would have to admit the abject failure of this administration in safeguarding the public monies. No doubt you would prefer the current situation over the balanced budget and economic prosperity we had under Clinton. Trickle down economic theory is bullcrap, and the track record of the Reagan Bush economies speak for themselves to all those with ears. You can quote all the GDP statistics you like, but the fact is, a balanced budget with a net surplus is far better for our whole economy than the deficit laden gift to the rich we currently operate under. If the economy is so great, why is the income gap increasing at such an alarming rate?
the answer you run from is that the economy as a whole benefits the rich at the expense of everyone else. If you cannot understand that, that you are part of the 1% who are economically benefiting, or the 22% who still support the Bush administration. Either way, you are in the minority, and the recession/depression we face probably won't bother you, but some of us are hurting as a direct result of the failed economic policies of the Republican party.
"And yes, I can also agree that many families are indeed going bankrupt (that whole sub-prime thing)…your point just helps make my point. "
With todays mortgage "crisis", there is only a very small percentage of families who are in arrears.
"your point just helps make my point."
Nonsense. You point to a tiny minority of families with mortgages to try to make your point.
"And here is the difference. I have a mortgage, but I also have a job and can keep generating the income to keep paying down the mortgage. "
And following the analogy, the equivalent to your job is the GDP of the nation, which of course is at a record high.
"In our economy, our solution is to have more money printed up, "
This is true of *all nations*. There is no gold standard or similar anywhere in the world anymore. Given that fact, why does this matter?
"What is relevant is the total amount of debt, who owes it, and how do they hope to pay it off. "
You have yet to make the case that percentage of GDP is irrelevant, and you neglect to inclede in your list perhaps the most important thing of all, *what* is bought with the debt. Any of those billion items is debatable.
"And, the bank can, if it wishes, ask you to pay off the balance of your loan or risk foreclosure. "
That was true in the depression era but not now.
"Why do you favor economic policies that put us at a severe economic disadvantage to our 'enemies'?"
What economic policy have I stated that I "favor"?
"And yes Bush does control congress in regards to funding; it's called the veto."
Nonsense. That's a "check and balance" device, hardly "control". The President can only veto a bill *after* Congress has passed it. What nonsense.
And yes Bush does control congress in regards to funding; it's called the veto.
"lets all max out our credit cards buying essentials like bikes and hand tools and such, and then not pay the bill. Or better yet, fill up your tanks, then not pay the bill."
Sure, just load the burden on to evryone else. How selfish.
"Someone is making $150.00 per barrel between the oil field and the distillery."
Whoa! Another big increase! I hadn't heard of it.
"jakenewton, are the commodities markets a bubble - you bet they are. "
Thanks for your response.
"The worry is it could go higher, much higher. "
If it's a bubble, than I was specifically wondering about a burst, in the short term at least, such as with Tech and Housing.
jakenewton, are the commodities markets a bubble - you bet they are. Consider this, in the U.S. in 2003, pension funds and index funds (large, institutional investors) had about $13 billion invested in commodities. The amount as of March 2008 is $260 billion. The worry is it could go higher, much higher. The easing of regulatory restrictions has made this possible. This of course drives up all commodity prices including food. It is ironic that groups having absolutely no interest in taking possesion of any of the commodities contracts they bought are dictating food, fuel, metals etc. pricing around the globe. It's just business.....and some people around the world will pay a very heavy price for this "business".
While I would certainly agree that the Congress is equally at fault with regards to war funding, this does not change the situation or offer us any possibility of solving this problem any time soon.
And yes, I can also agree that many families are indeed going bankrupt (that whole sub-prime thing)...your point just helps make my point. And here is the difference. I have a mortgage, but I also have a job and can keep generating the income to keep paying down the mortgage. In our economy, our solution is to have more money printed up, thus again lowering the value of the dollars we currently hold, and lowering the prime rate, which also devalues the dollar. We work for our money; the Government just prints more (or, to be more accurate, buys more from the Fed, which is not a Government entity but a private banking consortium which sells us the money with added interest)
The debt may be below a certain percentage of GDP but that's irrelevant. What is relevant is the total amount of debt, who owes it, and how do they hope to pay it off. It seems as if you (jakenewton) think a surplus is not a good thing.
And no one likes to have a mortgage hanging over them; it's just more money in the hands of the banks, and any mortgage holder longs to be free of debt...republicans seem to revel in debt. Why is that?
And, the bank can, if it wishes, ask you to pay off the balance of your loan or risk foreclosure. What does the U.S. do when China/Arabia/Japan calls in their note?
Why do you favor economic policies that put us at a severe economic disadvantage to our 'enemies'? Why do you want the terrorists to win?
"Looting the treasury; Bush has bankrupted this nation by taking us from a surplus economy to a deficit economy,"
The debt is at 65% of GDP, not a historic high. Can you think of families with mortgages that are much higher than that percentage of their annual income? Of course, it's *common*. Do we call them "bankrupt"? Of course not.
Only congress spends money. Bush does not control all of the congressmen who voted for appropriations bills.
there is something strange going on.
I have read dozens of articles by "experts" over the past months, each contradicting each other.
Experts with data that suggests oil demand is not rising as fast as other experts claim.
Experts saying speculators are the problem, others saying they are not.
Money supply is the issue according to others, massive US dollars printed to finance the Iraq war.
I have read articles stating oil supplies are dwindling, and other articles showing massive new reserves disovered in Brazil, Oregon/Canada, Saudi Arabia, and of course Iraq.
Very strange.
Why high prices right now? The collapse of the sub-prime market which led to the increase in the money supply/lowering of the prime rate, which led to lowering the value of the dollar, which raises the price of speculative oil, which encourages more futures trading etc. I would agree that this is a bubble, and that the bubble will indeed burst. It just may not burst until after the collapse of our economy.
There is a war connection, though some here seek to dismiss that angle. First, how much oil is Iraq currently producing, and who is taking it out, and where is it going, and who is profiting? Nobody I have read/talked to knows the answer to these questions, and this is, in my opinion, the great crime being perpetrated under cover of the war crimes.
Or perhaps everyone here knows that Iraq is the only major oil producer without meters on the wells. That's right...the oil gushes out un-metered and unaccounted for. How much? Nobody knows. Is there a direct pipeline to Kuwait, installed after the invasion? Nobody will say. But I have seen satellite pictures which, if true, indicate such a pipeline was built and guarded by U.S. forces. Anyone doubting this should look at a map overlay of pipelines/pumping stations and U.S. bases. they match up pretty well. That map can be seen here: http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=132&topic_id=3190892
The other war effect comes from our strong military presence in the Persian gulf and saber rattling against Iran (another oil producer). The crucial straits of Hormuz are susceptible to blockade by Iran, and any conflict with them raises global fears of supply problems. Even if we have no intention of invading Iran, we are acting as if we were; and that is enough to raise fear among the speculators, who have no problem with their increased profits.
Looting the treasury; Bush has bankrupted this nation by taking us from a surplus economy to a deficit economy, and yes deficits do matter, regardless of economic statistical sleight of hand (oh it's low as compared with percent of GDP or some such chicanery).
The beneficiaries of this looting are the contractors in Defense/security, construction, and yes, oil, which enjoys billions in taxpayer supported subsidies. As Reagan did, Bush policy took money away from social programs and increased spending in the Defense budget...ours is greater than all the world's defense budgets combined, and that includes, of course, Russia and China. This shuffling of money from social programs to defense is part of the economy-crippling strategy of the Republican party.
Now go ahead...address these issues with your 'facts' and stick to the issues trolls/
Only SOME of the current price it is a speculative price bubble. The production of light sweet crude oil has peaked, if I am right, and will never return to its former level. Our refineries are mostly capable of processing this sort of easy to process oil. So there is a genuine shortage. It may not cost the oil producers anywhere near that cost to extract the oil, but there is no point in selling it for less, that would lead to real shortages and rationing. Demand is greater than supply, and so the price must be high.
There is plenty of heavy sour crude available, so when our refineries are rebuilt to cope with heavy crude (viscous), or sour crude (high sulphur), then the price at the pump will either drop or or rise at slower rate, until of course, that peaks also, but that COULD possibly be a decade away.
This is news? Really? It should be obvious to the casual observer that oil futures is the only place left for the gouging to be going on. The only question is who is doing it, or is it really just a bubble that can't collapse because of demand. Someone is making $150.00 per barrel between the oil field and the distillery. My guess is that it's the executives acting as private investors, selling to their own corporations. The money is somewhere, and we all remember DeepThroat don't we?
@jonoden
I followed your link. Those graphs are great. I should make a poster out of them and put them on my wall.
joneden, thanks for the link;
lets all max out our credit cards buying essentials like bikes and hand tools and such, and then not pay the bill. Or better yet, fill up your tanks, then not pay the bill. Or even better, how about both? Then see just how long you can make that tank last. if you can go two months on a tank of gas, you are doing something right. Two days, not so good. Two weeks on a gallon is downright awesome!!!
This will also really stick it to those monied interests that depend on the minimum payments on those cards to lube the system. Its all funny money anyways. You seen those new 5 $ bills? Crazy thing is the date on them is 2006, not 2008, so they had stacks of cash just waiting to be released into circulation for two years? More and more often, when i withdrawn money from an atm, i get fresh crisp uncirculated bills, not old worn out ones...The money supply has grown, but the commodities they buy has not, therefore hyperinflation like we are seeing today is the result. A friend today had me pump her tank in a little chevy car, and 10 or 11 gallons was $52.25, its insane. HINT, when you pump, dont go full pressure on the pump, you get more fumes and less gas, and when you are done pumping also shut off the machine, then grip and ungrip the handle to get all that gas still in the line that you paid for. Kudos to those that don't have to worry about these things though, riding bikes and walking is so much better for you.
High oil prices wreak havoc around the world:-
http://www.independent.co.uk/environment/green-living/shocked-how-the-oil-crisis-has-hit-the-world-837...
What am I going to do, go on a hunger strike because commodities and oil speculation has caused food prices to soar above their production costs, i.e. gouging.
Eat mud pies like the poor people of Haiti!
"As for looting the treasury, "
Another thing, it's Congress that spends money, not the President.
" And I'm sorry if "going apeshit" offended you. As for looting the treasury, just exactly how stupid can you get with the national debt now larger than the entire aggregate of all previous national debts combined."
Not as a percentage of GDP. That was back in the mid forties.
" What am I going to do, go on a hunger strike because commodities and oil speculation "
The fact is you *choose* to buy gasoline. It may be difficult for you to set things so that you may lower or eliminate that purchase, but it is well within what is possible for you to make the choices neccessary to do that. The choice is yours.
@JK
"No one can gouge you without your permission."
What a load of unmitigated crap, everyone has to eat. What am I going to do, go on a hunger strike because commodities and oil speculation has caused food prices to soar above their production costs, i.e. gouging.
Further due to poor infrastructure planning it's damn difficult to live without a car in the U.S. so many ARE forced to pay for gas just to keep their jobs to survive. SUDDEN price jumps that people can't plan for do in fact exactly gouge people without their permission.
Perhaps you sir have joined the New Age 'breatharians" and have figured out how to live on pure air to avoid commodities gouging, those of us in the real world have not.
What a joke. The MSM has segments titled something like: $5 a gallon gas coming soon?
This is just to get us softened up to the idea that, yes, it will be $5, then $6, then $10...
I still think back to bush saying to a reporter recently, "$4 a gallon gas; I hadn't heard that." Impeach the idiot even if it's the day before the election. Now that would be theater.
American's are pathetic. We have the power to drive down the price of oil by serious short term conservation. Just stop buying it. Put yourselves out a little and develop creative ways to stop using so much of it. Most people will not even do something so simple as to carpool until the price drops. I won't carry the burdens of selfish people. A gallon of gas now lasts me two weeks so I could care less if it goes up to ten dollars a gallon.
jakenewton
I'm getting the distinct impression that you're a woman employee of the RNC. You have absolutely nothing to add to the conversation but schoolmarmish nonsense. And I'm sorry if "going apeshit" offended you. As for looting the treasury, just exactly how stupid can you get with the national debt now larger than the entire aggregate of all previous national debts combined.
"A barrel of oil today is worth a barrel of oil tomorrow."
WRONG!
The deeper into an oil field you extract, the less ENERGY the extracted oil is worth, due the energy required to bring the oil to the surface. At PEAK OIL we enter a period in which oil is worth LESS ENERGY than it required to draw from it's source. Did you ever suppose you'd see a day when a barrel of oil cost you energy?
"They probably figured they could get away with price gouging,"
No one can gouge you without your permission.
"Yes, and the cushion costs money to build. Having a cushion lowers prices, why spend money to devalue your product. It is obvious, that the oil cartel, which is Big Oil, has an incentive to have less of a cushion. Thats manipulation. We need to break up these cartels and get competition into the markets."
What "cartel"? They compete with each other, they are not like OPEC, unless that was who you are talking about. What keeps one of them from lowering their price to get more volume?
Big Oil and Big Finance are partners in crime. According to William Engdahl, about 60% of the price of oil is due to speculation. Goldman Sachs prediced oil would drop to 55 barrels of oil last December, and now thye are up to 200 dollars a barrel. It's a bubble helped by a lack of a cushion.
"Explains Maxwell: "Any system needs to have a little cushion between adversity that strikes — weather factors or cut-offs for political purposes or political struggles from civil wars. We don't have in this system enough of a cushion. Normally, capacity utilization is considered ideal around 94 to 95 percent. So our 98 percent capacity utilization is well above that and we can't get it down, because it takes 5 to 7 years to create it and we aren't spending the money today that would create it 5 to 7 years out.""
Yes, and the cushion costs money to build. Having a cushion lowers prices, why spend money to devalue your product. It is obvious, that the oil cartel, which is Big Oil, has an incentive to have less of a cushion. Thats manipulation. We need to break up these cartels and get competition into the markets.
Many believe those countries holding the oil have the power. Thats nonsense. Oil in the ground without the means to extract it, refine it, ship it to the end buyer is worthless. Big Oil controls this. Iran has to import gasoline, because Big Oil won't sell them the equipment they need to do their own refining.
Indirectly, the war in Iraq has something to do with oil prices. Imagine if sanctions on Saddam were lifted, and he allowed the Chinese and French and other non-US/UK oil companies in to extract his oil, which by all accounts is more plentiful and is cheap to extract (1-2 dollars a barrel). Oil prices today might be 20 dollars a barrel. But we invaded Iraq, saying the oil would pay for the costs of the war, then we intentionally botched the occupation that fueled sectarian violence, so the oil could not be extracted to it's maximum potential, and oil is at 130 dollars.barrel.
As for the global warming component coming from CO2 produced from burning oil, 31,000 scientists say its not true.
http://www.telegraph.co.uk/news/worldnews/2053842/Scientists-sign-petition-denying-man-made-global-war...
CO2 is food for plants and our crops that we eat, and it's increase has improved crop yields allowing us to feed the world. We need to burn more oil, we have plenty according to Thomas Gold. Feed our plants, grow more food, populate the planet to create more Einsteins that will solve all the worlds problems.
I really get tired of hearing about supply and demand. We all know this is a bunch of hooey. I remember that the price of gas began going up right after Katrina. I also recall that EXXON began making record profits at that time as well. They probably figured they could get away with price gouging, and spew a bunch of garbage about supply and demand and everyone would calm down while they make themselves filthy rich. When we wake up and take our pitchforks to these billionaires and nationalize these evil oil demons, then we can switch over from a gas guzzling tank driven economy to something more sensible. Mass transit/green driven transportation. Who is making a money off of driving truckers out of business? Who is making money while the rest of us suffer under this oppression? These are the guilty. I don't believe for one minute the whole supply/demand blah, blah, blah. Someone is making loads of money right now.
"Please Ignore jakenewton!"
Oh yes, that way you don't have to respond to reasonable arguments based on facts.
"He adds nothing to the debate,"
I am still trying to get you or someone else to answer the question " If oil prices are all about the war, than what has happened in the war in the last year that's any different that would cause oiul prices to have doubled in the same period?"
This is in fact something I have added to the debate. That there is still no apparent good answer to the question strongly suggests that the price of oil is *not* entirely due to the war. That means that those who think so should maybe rethink their position.
It is *bad* to have bad ideas, OK? So if my contribution here causes just one reader to to get rid og just one bad idea, the world will be a better place for it.
"This is a serious issue that is causing, people in Haiti to eat dirt, bread riots in Egypt, and rice shortages in Asia. It is destroying the U.S. economy, creating un-employment, and hardship for millions."
*I* did all that? *blush*
" I don't know what motivates him/her."
I'll tell you why, even though it shouldn't matter: It's much more challenging to me to discuss and debate matters in a group where most people disagree with me than to go to some place where there would be no such disagreement. I would strongly suggest that some of you try it some time, and see if you can hang in there or not.
"Some have suggested that jakenewton is a paid troll,"
It's only a coping mechanism for them to deal with what they sense as dishormony, or even a nagging questioning of their sacred beleifs.
"Yesterday, I un-wittingly responded to his /her inane critique of my comment, and wasted a couple of hours of my life. "
*You* should ignore me then, for the sake of your own well being, please. You need to take care of yourself and not let things like this get to you.
Please Ignore jakenewton!
He adds nothing to the debate, offers no suggestions, and takes glee in getting commenters into arguments.
This is a serious issue that is causing, people in Haiti to eat dirt, bread riots in Egypt, and rice shortages in Asia. It is destroying the U.S. economy, creating un-employment, and hardship for millions.
Some have suggested that jakenewton is a paid troll, others have used foul language against him/her, I don't know what motivates him/her. Yesterday, I un-wittingly responded to his /her inane critique of my comment, and wasted a couple of hours of my life.
If you have the dis-pleasure of having jakenewton, respond to your comment, do yourself and everyone else a favor - ignore jakenewton.
purvis, nothing in your last post supports your claim ast to what the sole purpose of the invasion was. Further, you offer no specifics as to what you mean by "went apeshit" ot "looted the Treasury", so it's hard to see what idea if any this post could possibly support.
jakenewton
It wasn't until the Iranian government announced they wanted to form their own bourse and trade oil in Euros that the Bush crime family went apeshit. Now there's nothing they can do about it. Furthermore, the systematic looting of the Treasury by the Bush crime family has made anyone holding T bills very nervous and the big players (China, Western Europe) have started to dump them at fire sale prices.
"3.) failure to reign in refiner/distributor profiteering,"
When you try to limit their profit, they will simply stop producing when they near that limit. You can't force a business to operate if they don't think they should. And if your suggestion is "fair", wouldn't it also be "fair" to give money to companies when they post losses? You may not be old enough to remember but htere was a period when oil companies lost money.
The most important factor is supply and demand: supply is having trouble keeping up with unabated demand growth.
We didn't ask which factor is most important. We want to know all the significant factors, which are 1.) failure to stop the bidding wars among consumers, 2.) failure to reign in private speculation, 3.) failure to reign in refiner/distributor profiteering, and 4.) failure to reign in the US government's imperial misadventures that inflame the first three.
All four are failures of the US government to serve the public interests which include stable and sustainable energy sources and supplies. The problem is the US government failing its responsibility.
if speculation is not the main culprit, then why was the price of oil stable until after the meltdown of mortgage-backed securities? the rulers fear greatly that the american people will understand the role of speculation in our economic system.
"The sole reason to invade Iran was to stop them from dumping the dollar as the currency of exchange but it's too late now. "
Without actual evidence for this you are just guessing. You are entiltled to do that but that's all you are doing.
The Great Oil Swindle
How much did the Fed really know?
By Mike Whitney
Click on the link for the article
http://www.informationclearinghouse.info/article20011.htm
The so-called rise in oil prices is nonsense. The dollar is in free fall and the oil producers and other oil consumers have quietly switched to the Euro as the oil exchange currency. The sole reason to invade Iran was to stop them from dumping the dollar as the currency of exchange but it's too late now. It's already happened worldwide. Welcome to pushing a wheelbarrow full of dollars down to the corner to buy a beer.
Dead Eye Dick and The Shrub!
WAR, War, WAR.
STOP the WAR and
GAS will drop by half.
EXXXon Moron.
Words do little but to shore up the ego unless they are followed by widespread, INDIVIDUAL ACTION. What is EACH ONE of us doing to lighten the potentially fatal planetary burden of climate change?
I think oil in euros is up about 80% in the last year, anyone know for sure?
"The amount of money flowing into the commodities market is about 5 five fold from as little as a few years ago, it is $billions upon billions."
Do you think it's a bubble then?
"World-wide oil demand has not gone up five fold in the last 6 years."
You can measure "consumption" but not demand.
"It's the war stupid! And the threat of more war against Iran."
Yes war in the Middle East is a factor but what has happened in the Middle East over the last year to have cause a doubling of oil prices in the same period. You can't blame the conflict there exclusively for the increase without a very good answer to that question.
Opps...the Euro was about .98 cents in 2002 but that still remains about a 60% decline.
A current view:
http://www.themoscowtimes.com/article/1016/42/367724.htm
" The sole reason for this enormous difference is the incredible depreciation of the dollar against the euro. From one for one at the end of 2002, it now costs nearly $1.60 to buy a euro.
The chorus of complaints about the price of gasoline gets louder every day and is even becoming a campaign controversy both across and within parties. The same old solutions we have heard for years are being proposed -- conservation, increased domestic exploration and manipulations of the tax on gasoline. But no one is pointing to what is by far the biggest reason for the exorbitant cost to fill up a tank of gasoline these days.
The collapse of the dollar exchange rate, alone, explains at least half of the increase in the pump price of gas over the past five years. If it were not for the falling value of the dollar, the price of gasoline wouldn't be an issue."
And while we are paying more at the pump the average American is also inheriting about $5 Trillion (Stiglitz) in war debt to subsidize record MIC and Bil Oil profit. And it remains to be seen how all of these factors will play out as the overall American economy (and related economies) continue to decline as a result of the most expensive war crimes in world history!
And well worth the read, as the plot thickens !
CóilÃn Nunan: Oil, Currency and the War on Iraq
http://www.feasta.org/documents/papers/oil1.htm
Oh please! What nonesense. This article and the last are nothing but a shallow attempt at defending neo-con foreign policy and wall street speculators.
World-wide oil demand has not gone up five fold in the last 6 years. It's the war stupid! And the threat of more war against Iran.
The instability in Iraq. And the possibility of war against Iran, and the closing of the Hormuz straits, has sent oil futures prices higher and higher.
It's The War Stupid
When Bush went to Saudia Arabia and begged the Saudis to increase oil. They told him that they increased supply by 300 million barrels the previous week, their has been no increase in demand or supply problems, drink your tea and get the hell out of our kingdom.
The oil execs testified a few weeks ago that the price of oil should be at $55 per barrell.
Increasing world-wide oil demand, and shrinking supplies, is indeed a long-term problem. However, it does not explain the dramatic rise in prices, over the last 6 years. It's the war stupid.
On the positive side. High oil prices are causing people to change their behaviour. S.U.V sales are down, people are driving less, which is all beneficial to the environment. On the other hand, high oil prices have a down side, inflation is taking off, and food riots are spreading around the world.
This is dumb economics. Exxon and the Saudis are profiting at the expense, of the poor and the hungry, and our oil dependent economy. Our economy is so oil dependent, that you can easily correlate our economic growth, with the price of oil. Look back the last 50 years. If oil prices do not dramatically decline our economy could collapse.
I am Green, I do not own a car, so my oil exposure is limited. However, I am affected by the economy, and I am effected by mass unemployment and social unrest. If you want to change peoples behaviour, tax oil and spend it on green initiatives, don't give the money to Exxon and the Saudis.
If you want to get the price of oil down, Vote Obama for President, and the speculators will instantly cover their futures positions. This is the best option to get the price of oil down. And then let's tax the hell out of S.U.V.s, gasoline, invest in mass transit, solar, wind and renewables.
These two articles, written by Robert Weissman should be seen for what they are, a shameful attempt to deflect attention away from neo-con foreign policy and wall street speculators. I'm surprised that Russell Mokhiber is associated with this clown.
Don't the refinery owners have some influence on supply?
We will either have a "revolution"--a complete transformation or our economic/cultural/environmental paradigm--or we will continue down our current path to "failed statehood".
www.StudentsForTheEarth.org
This media genius forgot to mention that the American war crimes in Iraq have resulted in a reduction of Iraq's already reduced production and devalued the dollar at the same time. The Iraqi resistance has tied up the cheapest source of sweet crude on earth.
And against the Euro, which is now becoming an oil trading currency, the dollar has gone from about .90 cents for one Euro in 2002 to the present $1.56 which is about a 60% decline and not 25%. And of course the Euro is doing much better as a currency for purchasing oil.
http://www.alternet.org/waroniraq/86515/
Iraq War May Have Increased Energy Costs Worldwide by a Staggering $6 Trillion
By Geoffrey Lean, The Independent. Posted May 27, 2008.
"The Iraq War means oil costs three times more than it should.
The invasion of Iraq by Britain and the US has trebled the price of oil, according to a leading expert, costing the world a staggering $6 trillion in higher energy prices alone.
The oil economist Dr Mamdouh Salameh, who advises both the World Bank and the UN Industrial Development Organisation (Unido), told The Independent on Sunday that the price of oil would now be no more than $40 a barrel, less than a third of the record $135 a barrel reached last week, if it had not been for the Iraq war."
And:
The weak dollar is discouraging new production which reduces supply.
http://www.mees.com/postedarticles/oped/a47n33d01.htm
"As mentioned above, drilling activities would be higher if current oil prices were associated with a stronger dollar. Therefore, dollar depreciation reduces supply."
" Dollar depreciation reduces activities in upstream through different channels including increased cost, higher inflation rates, lower purchasing power, and lower return on investment. Dollar devaluation increases oil demand in countries with appreciated currencies because of an increase in purchasing power. Large dollar devaluation reduces the supply of oil and increases the demand for oil."
And Duh ! The dollar may soon "not be worth a continental".
http://www.alternet.org/waroniraq/38550/
Iraq Is Killing the Dollar
By Nicholas von Hoffman, TheNation.com. Posted July 10, 2006.
"History shows that inflation and the cost of war go hand in hand -- and Iraq is no different."
Menwhile the Federal Reserve keeps increasing the money supply (funny money) to keep the war machine running. Got a problem, just print more money !
I can't wait for my stimulus check to lift me out of poverty so I can once again be a consumer !
Could this be the decline of the American house-of-cards empire via imperial over-extension and inflation ?
Ya, well, when it's legal for 1% of 1% of 1% of the population to counterfeit enough money to increase the total supply by, say, 20% a year, what exactly do you expect??
This is just step #72 of the 219 steps that will need to be taken for that 1% of 1% of 1% of the population to own 99.9999% of everything on the planet that can possibly be owned, including you.
Article states:
Market manipulation may be contributing to the recent oil price spike — though even in the worst case, it is only part of the story. The most important factor is supply and demand: supply is having trouble keeping up with unabated demand growth.
If the price was $25 in 2000 $130 today, it is a real stretch to blame that on supply and demand or production costs. It's a bubble where you hope a lot of people lose their asses when it bursts. Of course, the system is so screwy now that the folks who speculate make it on the rise or fall.
The uncertain world created by Bush brings these folks out of their holes. Another example of the thesis last stated by Naomi Klein, that disaster may be a tragedy for most, but an opportunity for the bloodsuckers of the world.
Herman, Kingsville, Md
TECH 2: I have noticed the same thing--the same contradictions and it makes me wonder what IS true in this oily situation.
The amount of money flowing into the commodities market is about 5 five fold from as little as a few years ago, it is $billions upon billions. It is pension funds, hedge funds, institutional funds....the type of funds that wouldn't normally go to commodity futures trading but have recently in search of better returns. In the old days previous regulatory constraints would have prevented this however these regulations were done away with some 9-10 years ago or so.
Consequently, my guess is rampant speculation is good for about $20.00-$25.00 /barrel. The decline of the U.S. buck since 2002 is good for another $30.00 or so.
The underlying production/consumption problems will be with us forever going forward, we have entered a new era with respect to oil and people are going to have to understand this. The ballgame has changed, cheap gasoline for the monster SUV's is a thing of the past.
"How strange. U.S. oil consumption is down yet prices continue to increase at the pump ?"
It is "demand", not "consumption", that applies. Consumption is easily neasured, demand is not, as it involves things that cannot be measured such as psychology and ability to forecast future market conditions.
"Anyone writing about energy inflation in the good old U.S.A. who does not take into account the devaluation of the dollar or the invasion and occupation of Iraq is either incompetent or has a hidden agenda."
I cna't think of anyone who dismisses those points. Can you?